When businesses have trouble getting their customers to pay invoices on time, it can really affect cash flow and even their ability to survive. But what can you do to encourage your customers to settle their account? Here are 6 tips for getting your customers to pay on time.
1. Know your customers
Net terms are not for everyone. Plain and simple.
There are some customers who you can trust to pay you and some you cannot. Your job is to become an expert in figuring out which is which. In most industries, you can choose your payment terms and you have the option of advance payment, payment at the time of service or delivery, or issuing an invoice and waiting.
Do your due diligence. Find out as much about a customer as you can before you allow them to take credit with you. And remember, just because others in your industry do things a certain way, doesn't mean you have to.
2. Be clear
You need to spell out your payment terms very clearly in all your documentation. Whether its a proposal for service, your contract or your invoicing, make sure your customer knows what is expected of them.
You want your customer to get their invoice, understand what it’s for, and be able to tell who authorised the work or product purchase as quickly as possible. Avoid general phrases like “due in three weeks” and put an exact due date on your invoice. The easier you make it for your customer to cut you a check, the more likely you’ll be paid quickly.
And be sure to include the consequences for late payment. Leave no room for questions, and eliminate the possibility of any arguments.
3. Be polite
Sounds silly doesn't it, but simply adding a “please” or “thank you” to your invoice, can increase your chances of get paid.
Be friendly and warm in your invoices. Remember, the customer hasn’t paid late yet. By being cordial, customers will have a more positive response to your communication and you have a better chance at being atop their payment priority list.
4. Make it easy for customers to pay
The easier it is for people to do something, the more likely they will do it.
Send your invoices out in a timely manner, making the most of email tools by setting follow-ups and read receipts.
Set up online payment options and make sure whatever system you use is mobile friendly so customers can pay on their phones.
Include a link to a payment processing form on their invoice
Lastly, put your contact information right on your invoice so that its easier for your customers to contact you if they have a question.
5. Be flexible
Sometimes things happen unexpectedly and a customer may experience genuine hardship. it pays to be a little flexible in these cases.
Maybe look at offering these customers installment plans. Although you won’t receive your entire sum up front, it will allow you to start receiving cash and will help guarantee that you will, in the end, receive what you’re owed.
When you work with a customer to develop a plan that meets their needs financially and still gets cash flowing into your system, you’re saving yourself. Installment plans, in fact, are at times the difference between you getting paid or not getting paid at all. Option number 1 is always the best, even if you have to be flexible with the terms.
Our word of warning is this though...and it comes back to tip number 1, know your customer. If you think this is a one off or genuine case, then go for it. If you think its likely to be come habitual and is more likely to set a precedent you don't wish to, then maybe think twice.
6. Be consistent
The thing to remember when extending payment terms is the human element. We are busy people who easily get sidetracked and easily forget. It’s not unheard of for a customer to receive an invoice, place it to the side, and unintentionally allow it to get lost under a pile of papers.
Do them a favour and remind them. If it is a week before payment is due and you still haven’t received anything, don’t hesitate to send them a friendly reminder email or letter. Keeping yourself on their radar will only help increase your chances of getting paid.